A Supplier Partnering Agreement at the University of Las Vegas
A Case Study In partial fulfillment of the course requirements For Supply Chain Management Decision Sciences and Innovation Department Ramon V. Del Del Rosario College of !usiness De "a Salle #niversity
$y% Feli&' (im ). "im*aichong' "eonard S. "una' +erseus Anthony S. +anopio' Arman ,oseph -. Sy' (aye (aye Marineth -. +rof. illy Cuason Instructor
Table of Contents I.
Summary of Findings
!a"#ground Information
III.
Problem Statement
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IV.
Analysis of Alternatives
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V.
%etailed &e"ommendations
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VI.
Ans'er to Case (uestions
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Learning
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II.
VII.
I.
Summary of Findings
Mr. !o$ Ash$y' /ho is a ne/ly hired purchasing director of the #niversity of "as Vegas 0#"V1 is faced /ith a decision' /hether or not to accept the offer of -evada 2ffice Supply Company 0-2SC1. Currently' #"V has around eight suppliers for their general office supplies' 3o/ever' general consensus in their department /ants them to lessen the num$er of suppliers to around 4 /ith 5 of them $eing $ac*ups. 6his can increase efficiency $y lessening the num$er of papers that need to $e filed and the num$er of truc*s coming in and out. -2SC right no/ provides the $est value and already fulfills up to 789 of their office supply demand. 6he partnership agreement is for -2SC to $e the sole supplier of #"V for their office supplies. In return they /ill get a discount of around 78:89 and /ill receive daily deliveries. In addition' -2SC /ould also install soft/are that /ould allo/ individual users to order from them and have it delivered the ne&t day. 3o/ever' the terms of the agreement include that #"V /ould recommend other educational entities in "as Vegas to the same partnership. 6hey /ould also $e a$le to get a 59 re$ate for com$ined purchases that e&ceed ;<'888'888 a year. !ut' according to -evada la/ that if an entity enters into an agreement other entities may tie into that' $ut -2SC doesn=t let other institutions *no/ a$out the 59 re$ate its offering. II. !a"#ground Information Nevada Office Supply Company
6he -evada 2ffice Supply Company has $een supplying office materials to educational institutions for over <7 years' it has a /arehouse in Southern California $ut has recently opened one in "as Vegas Valley since it /as a$le to gro/. It e&pects to increase sales $y around 589 due to the increase of institution and population gro/th in the "as Vegas Valley area. University of Las Vegas
#niversity of "as Vegas recently hired a ne/ purchasing manager' Mr. !o$ Ash$y. #"V is a state university and is a heavy consumer of office supplies /here they spend $et/een ;<'888'888 ;<'788'888 a year. 6hey have multiple suppliers for office supplies $ut their main supplier is -2SC.
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III. Problem Statement
6he pro$lem Mr. !o$ Ash$y is facing is /hether or not he should accept the offer given his <7day time limit. !asically' the #niversity of "as Vegas /ants the $est value for money office supplies and sometimes the cheapest priced ones. 6hey used to do this through competitive $idding $y having multiple suppliers associated /ith them. Another pro$lem Mr. !o$ Ash$y should consider is not >ust /hether or not it /ill $enefit the company in terms of costs' $ut /hether it is legally allo/ed to undergo in such a partnership /here competition is $ypassed. 3e also has to consider /hether it is an ethical move to ta*e part in this deal *no/ing that -evada state la/ states that other educational institutions should also get the same deal' $ut in reality they are potentially getting an e&tra 59 re$ate not offered to the others. Furthermore' the deal $eing $rought upon Mr. !o$ Ash$y appears to $e a $it shady considering that -2SC does not /ant any details of the deal to $e disclosed to other organi?ations. 6hey are seemingly trying to get ahead of competition $y not giving them a chance to compete. IV. Analysis of Alternatives
6here are four alternatives in /hich Mr. Ash$y can choose. First is to agree to contract the partnership agreement /ith -2SC. Second is to ignore or disagree the partnership agreement and stic* to its previous supplier setup. 6hird is to pursue their intention of finding three suppliers' one of /hich /ill $e the ma>or and the other t/o /ill $e the $ac*up. Fourth /ill $e to negotiate /ith -2SC to contract /ith them $ut include a clause that they /ill source at t/o $ac*up suppliers for a list of reason /hich are stated into the contract. V. %etailed &e"ommendation
2ut of the four alternatives listed' negotiating and pursuing a contract /ith -2SC including a clause that supplies can $e also sourced to t/o $ac*up suppliers for listed reason /ill $e included. 6he agreement /ith the -2SC /ill $e very $eneficial to $oth parties $ut unfortuitous events can happen hence the #"V must protect itself in the contract. If the -2SC /ill not agree to the contract' then that /ill $e the time to inform the other suppliers that initiative for partnership /as introduced $y their competitor to spur competition /hich /ill $e $eneficial to #"V. VI. Ans'er to Case (uestions . *hat legal issues+ if any+ might be involved in ,-SCs proposal/
6he main legal issue this case presented is the elimination of the competitive environment that firms and other organi?ations usually rely on. 6his could have legal consequences $ecause the government has anti monopoly la/s and due processes to 5
ma*e sure the mar*et is a fair and competitive one. As stated in the first paragraph' @Mr. Ash$y /as given this offer /ithout $enefit of competitive $idding and /as only given <7 days to accept the offer.' this meant that they /anted to $ypass the $idding process and instantly gain customers pro$a$ly $rea*ing la/s in the process for it $eing an under the ta$le arrangement type of agreement. Furthermore' $y the state la/' if an educational entity enters into an agreement then it means other institutions may also tieinto that agreement /ithout the need to see* further quotes or $ids from other suppliers. hat I thin* this implies is if #"V gets a deal' other institutions should also get the same deal' /hich not /hat /as offered to #"V since they are getting a $it e&tra compared to the others. $. *hat are the ethi"al issues involved in ,-SCs proposal/
6he ethical issue here is that #"V is a government o/ned school. 6hey have to $e careful $y operating ethically and under the $oundaries of the la/. hat -2SC is offering is anticompetitive and seems to $e trying to pressure #"V into ma*ing a hasty decision $y giving them such a short time to decide' <7 days. As a government o/ned university' they have reason support other competitors in the state and create a healthy industry since $y partnering /ith -2SC' they are paving the /ay for other educational entities into the same partnership effectively eliminating competition in that mar*et and creating a monopoly. 0. Is this a true partnering agreement/ %is"uss.
6his is a true partnering agreement since it /ill $enefit not only the #"V /ith the discounts in the contract $ut also the supplier' -2SC' $y continuous sales in their part. Moreover' /in /in situation for $oth parties /ill $e o$served since $oth of them /ill $enefit tremendously. ). 1o' should 2r. Ashby analy3e the proposal/
Mr. Ash$y should analy?e the proposal $y measuring the overall $enefit of the contract /ith -2SC throughout the term and then comparing it to the $enefits factoring not only the cost $enefit $ut also the $enefit of supplier relationship should they not pursue the contract' or should they pursue their prior intention of pursuing one ma>or supplier and then t/o $ac*up supplier. 6he proposal of -2SC is >ust an opportunity they /ere presented and they must do their $est to determine if it /ill $e a good opportunity for the company or a hoa&.
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VII. Learning
In order to get the $est suppliers' one company must have 4 suppliers in hold < ma>or and 5 $ac*ups. A $idding setup among 4 companies /ill give #"V at the care of Mr. Ash$y to have the $uyer $argaining po/er in terms of cost. A great num$er of suppliers is good $ut is not cost efficient' and in order to increase efficiency it is $etter to pool 4 suppliers and *eep the list of all suppliers as a $ac*up in case of fortuitous events. Also' every $usiness decision has an effect due to its environmental factors such as government rules and regulations.
